Market Perspective for September 21, 2018

Equities hit new all-time highs this week led by a strong rebound in value sectors and the Dow Jones Industrial Average. The DJIA rallied 2.25 percent and the S&P 500 Index climbed 0.85 percent. The Nasdaq fell 0.15 percent.

SPDR Financials (XLF) gained 2.26 percent to lead major sectors with strength in insurers. SPDR Industrials (XLI) rose 1.66 percent. SPDR Technology (XLK) lost 0.10 percent. SPDR Communication Services (XLC) rose 0.64 percent as allocations began migrating to the new sector.

Initial claims for unemployment fell to 201,000, the lowest claims total since 1969.

Homebuilder confidence for September matched August’s figure. Housing starts in August beat expectations at an annualized pace of 1.28 million. Starts have increased 6.9 percent in 2018 versus the first eight months of 2017. Existing home sales in August held at an annualized pace of 5.34 million.

The flash manufacturing PMI reflected strengthening in the manufacturing sector. Europe’s flash PMI was lower than expected.

Long-term interest rates started rising ahead of next week’s rate hike. The 10-year Treasury yield hit 3.10 percent before pulling back. Floating-rate funds outperformed this week. Invesco Senior Loan (BKLN) rose 0.22 percent.

Foreign stocks rebounded strongly this week with foreign currencies. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) advanced 2.80 and 3.03 percent, respectively. SPDR S&P 500 (SPY) returned 0.84 percent. Invesco DB U.S. Dollar Index Bullish (UUP) slid 0.75 percent. WisdomTree Emerging Currency (CEW) gained 0.86 percent.

Earnings reports and reactions were mixed this week. FedEx (FDX) shares fell more than 3 percent on the week, while Oracle’s (ORCL) gained more than 3 percent. General Mills (GIS) sank nearly 7 percent on the week after reporting contracted margins. Shares of Micron (MU) rallied after it beat profit expectations, but general weakness in the semiconductor sector left shares nearly flat on the week.

 

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